Hi 9921,

Actually I posted it but Jason Hommel said it. I am not an knowledgeable expert but anyways I will try and use lind-waldcock.com to try and explain what Hommel means. The theory is:

"A futures contract is an obligation to buy or sell a commodity at some time in the future, at a price agreed upon today. The word commodity is defined very broadly to include physical commodities, financial instruments, forex and stock indexes. The exchange clearinghouse is the counterparty to every trade, which not only reduces credit risk in futures trading but also makes it easy for position holders to exit at any time they wish.

Importantly, a futures contract is an obligation (not a right like an option) and that obligation must be fulfilled. In most cases it's fulfilled by simply making an offsetting trade that takes you out of your original position (sold if one has bought; bought if one has sold). But strictly speaking, you can choose to carry the position all the way to the delivery date, when it's fulfilled either by the exchange of the physical commodity or by a cash settlement.

However, the value of a futures contract is ultimately tied to the underlying product or instrument (e.g., S&P 500 Index, gold, crude oil, U.S. Treasury bonds or notes, soybeans, etc.) via each contract's specifications. You can either buy (go long) or sell (go short) any futures contract and your risk (or potential profit) is virtually unlimited."

Now Jason is saying all futures are fraudulent with which comment I disagree- but lets limit the discussion to silver futures which I do think are fraudulent. He is implying that the bullion banks are essentially naked shorting the futures market using everything at their disposal including financial instruments like derivatives. I don't remember what the COMEX limit for bullion banks are but I seem to remember depending on the commodity exchange that the margin requirement was 2 to 15%. So if a bullion bank had a 2% margin it could turn a $1 million silver short into a $50 million short. Now Jason is saying that the COMEX exchange is complicit in this fraud by not enforcing any position limits on these trades. He also goes onto say that even if they did enforce limits that the bullion banks would go on to create a number of sub-entities that in total could short as much as one bullion bank can now. I said naked shorting because they don't really cover their trades like we do. They use a whole range of tricks to delay settlement until they have pulled down the silver price enough to make it worth their while to cover. Hommel is also implying that since the SLV ETF is or was managed by JPM that you shouldn't count on them actually holding the bullion as it may have been used to settle a trade. I hope he is wrong on that point as I have traded SLV frequently in the past.